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Encircle the letter of your answer. Write your answer on the space before the number if it is not found
in the choices provided.

1. The Owners of a corporation whose names are mentioned in the articles of incorporation are
a. Shareholder c. Promoters
b.Members d. Incorporators
2. In partnership liquidation, how are partners salary allocations treated?
a. Salary allocations take precedence over creditors payments.
b.Salary allocations take precedence over amounts due to partners with respect to their capital
interests, but not profits.
c.Salary allocations take precedence over amounts due to partners with respect to their capital
profits, but not capital interest.
d. Salary allocations are disregarded.
3. Which of the following procedures is acceptable when accounting for deficit balance in a
partners capital account during partnership liquidation?
a. A partner with a negative capital balance must contribute personal assets to the partnership
that are sufficient to bring the capital account to zero.
b. If a partner with a negative capital balance is personally insolvent, the negative capital
balance maybe absorbed by those partners having a positive capital balance according to
the residual profit and losses sharing ratio that applies to all the partners
c. If a partner with a negative capital balance is personally insolvent, the negative capital
balance maybe absorbed by those partners having a positive capital balance according to
the residual P/L sharing ratios that apply to those partners having positive balance
d. All the above procedures are acceptable.
4. In partnerships liquidations, what are safe payments?
a. The amounts of distributions that can be made to the partners, after all creditors have been
paid in full.
b. The amount of distributions that can be made to the partners with assurance that such
amounts will not have to be returned to the partnerships
c. The amounts of distributions that can be made to the partners, after all non-cash assets
have been adjusted to fair market value.
d. All the above are examples of safe payments concept.
5. Retained earnings account would be debited for the following transactions, except
a. A two-for-one split
b. A 5% stock dividend
c. A 70% stock dividend
d. An appropriation of retained earnings for possible decline in values of inventories.
6. Which of the following will not require journal entry under the memorandum entry method?
a. Authorization of shares to be issued
b. Subscription received
c. Shares issued
d. Re-acquisition of previously issued shares
7. At what date should share certificates be issued?
a. Subscription
b. Authorization
c. Full payment
d. Retirement
8. All of the following is true, except?
a. For CPA Board Examination purposes, only Bonus Method is allowed.
b. When a partner dies, becomes bankrupt or becomes incapacitated, the existing partnership
is dissolved.
c. B is true
d. A is true and B is false
9. In the bonus method, the total contributed capital is equal to the total agreed capital but there
is an/a
a. Decrease in the individual capital of the partners
b. Increase in the individual capital of the partners
c. Increase or decrease in the individual capital of the partners
d. Increase or decrease in the total capital of the partnership
10. In the preparation of schedule of safe payments to partners, cash withheld for future liquidation
expenses and unrecorded liabilities that may be discovered is treated as
a. Operating Expenses
b. Liabilities
c. Loss on Realization
d. Theoretical Loss
11. After operating for five years, the books of the partnership of Bo and By showed the following
Net Assets P 169,000
Bo, Capital 110,500
By,Capital 58,500
If the liquidation takes place at this point and the net assets are realized at book value, the
partners are entitled to:
a. Bo to received P177,000 & By to receive P52,000
b. Bo to received P126,750 & By to receive P42,520
c. Bo to received P84,500 & By to receive P84,500
d. Bo to received P110,500 & By to receive P58,500
12. On June 30, 2016, the balance sheet for the partnership of Cruz, Merced and Prieto, together
with their respective P/L ratio were as follows:
Asset at Cost P180,000
Cruz,Loan 9,000
Cruz,Capital(20%) 42, 000
Merced, Capital(20%) 39,000
Prieto, Capital (60%) 90,000
Cruz decided to retire from the partnership. By mutual agreement, the assets are to be adjusted
to their fair value of P216,000 at June 30, 2016. It was agreed that the partnership would pay
Cruz P61,200 cash for Cruzs partnership interest, including Cruzs loan which is to be repaid in
full. No goodwill is to be recorded. After Cruzs retirement, what is the balance of Merced
capital account?
a. P36,450 b. P39,000 c.P45,450 d. P46,200
13. On November 30, 2016 Bee,Cee,&Dee decided to Liquidate BCD partnership. Their capital
balances and P/L on this date are as follows:
Bee,Capital P50,000(40%)
Cee,Capital 60,000(30%)
Dee, Capital 20,000(30%)
The net income from January 1 to November 30, 2016 is P44,000. On November 30, 2016, Cash
and Liabilities are P40,000 and P90,00, respectively.

For Bee to receive P55,200 in full settlement of his interest in the form how much must be
realized from the sale of the firms non-cash assets?
a. P223,000 b. P225,000 c.P149,000 d.P193,000

14. L, M, and N were partners with capital balances on January 2, 2016 of P300,000, P200,000 and
P100,000, respectively. On July 1, 2016 L retires from partnership. On the date of retirement the
partnership net loss is P60,000 and the partners agreed that certain assets is to be revalued at
P80,000 from its original cost of P50,000. The partners agreed further to pay L P225,000 in
settlement of her interest. The remaining partners continue to operate under a new
partnership, MN partnership. What is the total capital of MN partnership?
a. P345,000 b. P285,000 c. P340,000 d. P280,000
15. The balance sheet of KAYAPA partnership on October 10 2016. They decided to liquidate was
Cash P40,000 Liabilities P60,000
Other Assets 125,000 Rolex,Capital(50%) 45,000
Swatch,Capital(30%) 42,000
Timex,Capital(20%) 18,000
Total P165,000 Total P165,000
Assume that the other assets with a book value of P90,000 were sold for 50,000 and that all
available cash, except for a P10,000 contingency fund, is distributed immediately. In this case:
a. Rolex should receive nothing
b. Swatch should receive P10,000
c. Timex should receive P1,000
d. The cash should be distributed in the P/L ratio
16. Kaidou and Kuma are partners who share P/L in the ratio of 60:40 respectively. Kaidous salary is
P120,000 and Kumas is P60,000. The partners are also paid interest on their average capital
In 2016, Kaidou received P60,000 of interest and Kuma, P24,000. The P/L allocation is
determined after deductions for the salary and interest payments. If Kumas share in the
residual income(Income after deducting salaries and interest) was P120,000 in 2016, what was
the total partnership income?
a. 384,000
b. 564,000
c. 690,000
d. 774,000
17. Choose the situation that illustrates the minimum requirement of the law for corporate
Authorized Capital Subscribed Capital Paid in Capital
a. 100,000 5,000 3,125
b. 100,000 15,000 5,000
c. 50,000 12,500 3,125
d. 50,000 12,500 5,000

18. GOODAFTERNOON Company issued 20,000 share capital receiving land with a fair market value
of P500,000. If the share capital is no par value share and no stated value and the cost of the
land is P200,000, how much is the legal capital?
a. P-0-
b. P200,000
c. P300,000
d. P500,000
19. Inspiring Corporation issued its 1,000 shares, P10 par ordinary shares for P12,000 cash. Direct
costs related to the issuance are underwriters commission and printing cost of P1,500. How
much is the net share premium to be credited for the issuance of share capital?
a. P2,000 c. P500
b. P1,500 d. P-0-
20. Partners Akainu, Aokiji, and Kizaru are in the process of finalizing their profit and loss sharing
agreement. They have already agreed that Aokiji and Kizaru are to receive annual salary of
P45,000 each. Akainu, the managing partner, has two options.
Option 1: He will receive an annual salary of P110,000 or
Option 2: He will receive an annual salary of P90,000 plus a bonus of 20% of the profit after
subtracting their salaries and his bonus.

What should be the amount of profit so that Akainu would get the same share irrespective of his
a. 250,000
b. 300,000
c. 400,000
d. 450,000
21. Whitebeard, Big mom, and Shanks are partners with average capitals of P300,000,
P200,000,P500,000, respectively during 2016. The partners are entitled to salaries of P20,000
each plus 10% interest on their average capital. After deducting the salaries and interest, the
residual profit is to be evenly shared. During the year, the partnership incurred a loss of
P20,000. What would happen to Shanks capital at the end of 2016?
a. Increased by P10,000
b. Decreased by P10,000
c. Decreased by P8,000
d. Increased by P8,000
22. The capital balances of partners Rayleigh and Hacchi are as follows:
Rayleigh Hacchi
January 1, 2016,beg. 100,000 200,000
June 30,2016 Investment 50,000 -0-
September 30,2016,drawing -0- (100,000)
Balance 150,000 100,000
Their agreement is to share profit and loss based on average capital balance. How much is the
share of Hacchi in the partnerships income of P450,000?
a. 300,000
b. 270,000
c. 262,500
d. 180,000
23. PANINGKAMOT CORP has stockholders equity equal to 60% of total liabilities and stockholders
equity of P120 million. If the return on total assets invested registers at 9%. What is the return
on stockholders equity?
a. 10%
b. 6%
c. 15%
d. 12%
24. Hotohori Inc., has a total asset turnover of 0.30 and a profit margin of 10%. The president is
unhappy with the current return on assets; and he thinks it could be doubled. This could be
accomplished (1) by increasing the profit margin to 15% and (2) by increasing the total assets
turnover. What new asset turnover ratio, along with the 15 percent profit margin, is required to
double the return on assets?
a. 35%
b. 45%
c. 40%
d. 50%
25. Partners Anna, Barry and Chiona share profits and losses in the ration of 5:3:2. At the end of a
very unprofitable year, they decided to liquidate the firm. The partners capital account balances
at this time are as follows: Anna, P55,000;Barry,P62,250;Chiona, P37,500.

The liabilities accumulate to P75,000, including a loan of P25,000 from Anna.The cash balance is
P15,000. All partners are personally solvent. The partners plan to sell the assets in installment. If
Anna received a total of P50,000 as a result of liquidation, what was the total amount realized
from the sale of the non-cash assets?
a. 154,750
b. 169,750
c. 166,240
d. 175,300
26. Base on item 25, If Chiona received P15,500 on the first installment of cash, how much did
Barry received at that time?
a. 46,200
b. 35,750
c. 29,000
d. 29,250
For items 27 to 29
The statement of Financial Position of Jarren and Erlyn partnership on October 1, 2016 before
liquidation is as follows:
Cash 12,500 Liabilities 50,000
Other assets 137,500 Jarren,Capital(60%) 56,250
Erlyn,Capital(40%) 43,750
In October, assets with a book value of P55,000 are sold for P45,000, creditors are paid in full
and P5,000 is paid to partners. In November, assets with book value of P25,000 are sold for
P30,000. Liquidation expenses of P1,250 are paid and cash of P31,250 are paid to partners. In
December, the remaining assets are sold for P56,250.

27. In October, Erlyn would receive

a. 5,000
b. 3,000
c. 4,000
d. 6,000
28. In November, Jarren would receive
a. 18,000
b. 15,000
c. 5,000
d. 8,000
29. In December, Erlyn would receive
a. 22,000
b. 20,000
c. 22,500
d. 21,500
30. On December 1, 2016, Jona and Nelly are combining their separate businesses to form a
partnership. Cash and noncash assets are to be contributed. The noncash assets to be
contributed and the liabilities to be assumed are as follows:
Book Value Fair Value Book Value Fair Value
Accounts Receivable 100,000 105,000 80,000 78,000
Inventory 160,000 180,000 80,000 83,000
PPE 400,000 365,000 345,000 329,000
Accounts Payable 60,000 60,000 45,000 45,000
Jona and Nelly are to invest equal amounts of cash such that the contribution of Jona would be
10% more than the investment of Nelly. What is the amount of cash presented on the
partnerships Statement of Financial Position on Dec. 1 , 2016?
a. P1, 105,000 c. P1,005,000
b. P2,210,000 d. P2,010,000
For Items 31 to 33
Pol and Loc are partners with capitals of P200,000 and P100,000 and sharing profits and losses
3:1 respectively. They agree to admit Chic as a partner. Chic Invest P125,000 for a 25% interest in the
firm. Parties agree that the total firm capital after Chic admission is to be P425,000.

31. How much is the capital balance of Pol after Chics admission?
a. 104,687.50 c. 200,000
b. 214,062.50 d. 125,000
32. How much is the capital balance of Loc after Chics admission?
a. 125,000 c. 104,687.50
b. 100,000 d.214,062.50
33. How much is the capital balance of Chic after his admission?
a. 125,000 c. 111,250
b. 106,250 d. 108,300.50
For items 34 to 36

The following statement of Financial Position for the partnership of Anna, Elsa, and Olaf were taken
from the books on October 1, 2016.

Cash 80,000 Liabilities P160,000

Other Assets 320,000 Anna, Capital 96,000
Elsa, Capital 76,000
Olaf, Capital 68,000
Total Assets 400,000 Total Liab&Cap. 400,000

The partners agreed to distribute profits as follows:

Annual Salaries of Anna and Elsa of P4,000 each
Annual Interest of 5% on beginning Capital
Bonus of 15% to Anna based on income after salaries, interest, and bonus
Remaining profits: 25% to Anna, 35% to Elsa, and 40% to Olaf
The partnership began operations on October 1, 2014 and net income for the period ended Dec. 31,
2016 is P55,600. Distribute the income to partners:

34. Income distributed to Anna is

a. 20,800
b. 17,350
c. 18,450
d. 19,800
35. Income distributed to Elsa is
a. 20,800
b. 17,350
c. 18,450
d. 19,800
36. Income distributed to Olaf is
a. 20,800
b. 17,350
c. 18,450
d. 19,800

For items 37 to 41
Helen and Troy formed a partnership on January 1, 2016 and made the following investments
and withdrawals during the year:
Investment Withdrawal Investment Withdrawal
1/1 P45,000 P30,000
6/1 P18,000 P18,000
8/1 30,000 3,000
12/1 7,500

The partnerships profit and loss agreement provides for annual salary of P45,000 for each
partner. Helen is to receive an annual bonus of 10% on net income after salaries and bonus. The
partners are also to receive interest of 8% on average annual capital balances affected by both
investments and withdrawals. Any remaining profits are to be allocated equally among the
partners. Assuming a net income of P75,000.
37. The average capital balance of Helen is
a. 46,375
b. 20,750
c. 49,500
d. 15,000
38. The average capital balance of Troy is
a. 46,375
b. 20,750
c. 49,500
d. 15,000
39. Bonus to Helen is
a. 7,500
b. 6,818
c. 13,636
d. 0
40. Residual share allocated equally to Troy is
a. 10,860
b. 18,850
c. (10,185)
d. (18,000)
41. Income allocated to Helen is
a. 38,525
b. 30,710
c. 37,850
d. 36,475
42. A balance sheet for the partnership of KK, LL, and MM, who share profits 2:1:1 respectively,
shows the following balances just before liquidation:
Cash 48,000
Other Assets 238,000
Liab. 80,000
KK, Cap. 88,000
LL,Cap. 62,000
MM, Cap. 56,000

In the first month of liquidation, P128,000 was received on the sale of certain assets. Liquidation
expenses of P4,000 were paid, and additional liquidation expenses of P3,200 are anticipated
before liquidation is completed. Creditors were paid P22,400. The available cash was distributed
to the partners.

The cash to be received by each partner based on the above data:

a. 56,600 28,300 28,300

b. 86,000 61,000 55,000
c. 29,400 32,700 26,700
d. 88,000 62,000 56,000
43. After all partnership assets were converted into cash and all available cash was distributed to
creditors, the ledger of the Daniela,Erika, and Fredline partnership showed the following

Accounts Payable 20,000

Daniela,Cap(40%) 10,000
Erika,Cap(30%) 60,000
Fredline,Cap(30%) 90,000(debit)

Percentages indicated are residual profit and loss sharing ratios. Personal assets and liabilities of
the partners are as follows:
Daniela Erika Fredline
Personal assets 50,000 50,000 100,000
Personal liabilities 45,000 40,000 40,000

The partnership creditors proceed against Fredline for recovery of their claims, and the partners
settle their claims against each other.

How much would Erika receive?

a. -0-
b. 45,000
c. 47,143
d. Cannot be determined
44. Scott, Joe, and Ed are liquidating their partnership. At the date the liquidation begins Scott, Joe,
and Ed have capital account balances of P162,000,P192,500,P215,000, respectively and the
partners share profits and losses 40%, 35%, and 25%, respectively. In addition, the partnership
has a P36,000 Notes Payable to Scott and a P20,000 Notes Receivable from Ed. When the
liquidation begins, what is the loss absorption power with respect to Joe?
a. P192,500
b. P67,375
c. P550,000
d. P770,000
For items 45 to 47
The following data were compiled prior to preparing the balance sheet of the Ge-one Corporation as of
December 31, 2016:

Authorized ordinary share Capital,P100 par value P4,000,000

Cash dividends payable 160,000
Donated Capital 800,000
Gain on sale of Treasury share 80,000
Net unrealized loss on Financial Asset @ FVOCI 96,000
Share premium 320,000
Premium on bonds payable 240,000
Reserve for bond sinking fund 400,000
Reserve for depreciation 600,000
Revaluation increment on property 800,000
Retained Earnings Unappropriated 720,000
Subscribed ordinary share Capital 480,000
Subscription receivable 120,000
Share warrants outstanding 200,000
Treasury share at cost 144,000
Unissued ordinary share capital 800,000

45. What is the issued ordinary share capital & legal capital
a. 3,200,000 & 3,680,000
b. 4,000,000 & 4,000,000
c. 3,200,000 & 4,000,000
d. 4,000,000 & 3,680,000
46. How much is the share premium?
a. 1,200,000
b. 1,400,000
c. 1,120,000
d. 320,000
47. How much is the Appropriated retained earnings and the total SHE
a. 544,000 & 6,440,000
b. 144,000 & 6,640,000
c. 544,000 & 6,640,000
d. 144,000 & 6,440,000
For items 48 to 52

Tambis Company was formed on July 1, 2012. It was authorized to issue 600,000 shares of P10
par value ordinary shares and 200,000 shares of 8 percent P25 par value, cumulative and
nonparticipating preference shares. Tambis Company has a July 1- 30 fiscal year.

The following information relates to the shareholders equity accounts of Tambis Company:
Prior to 2013 -2014 fiscal year, Tambis Company had 220,000 ordinary shares issued as follows:

1. 170,000 shares were issued for cash on July 1, 2012 at P31 per share
2. On July 24, 2012, 10,000 shares were exchanged for a plot of land which costs the seller
P140,000 in 2006 and had an estimated market value of P440,000 on July 1, 2012.
3. 40,000 shares were issued on March 1, 2013, f0r P42 per share

During the 2014-2015 fiscal year, the following transactions regarding ordinary shares took

Nov. 30,2014 Tambis Company purchased 4,000 of its own shares on the open market at P39
per share.

Dec. 15, 2014 Tambis Company declared a 5% share dividend for shareholders of record on
January 15, 2015, to be issued on January 31, 2015. Tambis Company was having a liquidity
problem and could not afford a cash dividend at the time. Tambis Companys ordinary shares
were selling at P52 per share on Dec. 15, 2014

June 20, 2015 Tambis Company sols 1,000 of its own ordinary shares that it had purchased on
November 30, 2014 for P42,000


Tambis Company issued 80,000 preference shares at P44 per share on July 1, 2013.

Tambis Company has followed a schedule of declaring cash dividend in December and June, with
payment being made to shareholders of record in the following month. The cash dividends
which have been declared since inception of the company through June 30, 2015, are shown

12/15/13 P0.30 per share P1 per share

06/15/14 P0.30 per share P1 per share
12/15/14 P1 per share
No cash dividends were declared during June 2015 due to the companys liquidity problem.

As of June 30,2014, Tambis Companys retained earnings account had a balance of P1,380,000.
For the fiscal year ending June 30, 2015, Tambis Company reported net income of P80,000.

48. The Share Capital Ordinary is

a. 2,200,000
b. 2,308,000
c. 2,000,000
d. 2,408,000
49. The share premium-preference is
a. 1,520,000
b. 1,250,000
c. 1,220,000
d. 1,550.000
50. Share premium-treasury is
a. 5,000
b. 4,000
c. 3,000
d. 2,000
51. Retained earnings(before appropriation for treasury shares) is
a. 526,400
b. 800,400
c. 627,200
d. 818,400
52. Total shareholders equity is
a. 11,776,000
b. 12,176,000
c. 11,176,000
d. 12,776,000

For items 53 to 56

Chooseday Company showed the following shareholders equity on Dec. 31, 2014

Ordinary share Capital,P100 par P5,000,000

Preference share capital,6% P100 par, cumulative and participating P3,000,000
Preference share capital,8% P100 par,noncumulative and participating P2,000,000
Retained Earnings 530,000

Dividends in arrears are for 3 years.

53. What is the book value per ordinary share, assuming that preference share has preference as to
a. 108
b. 118
c. 96.60
d. 100
54. What is the book value per 8% preference share, assuming that preference share has
preference as to assets?
a. 108
b. 118
c. 96.60
d. 100
55. What is the book value per 6% preference share, assuming that preference share has
preference as to dividends?
a. 104
b. 115
c. 100
d. 106
56. What is the book value per ordinary share, assuming that preference share has preference as to
a. 104
b. 115
c. 100
d. 106
For items 57 & 58

Monopoly Company provided the following information for the current year:
January 1 shares outstanding 200,000
April 1 2-for-1 share split 200,000
July 1 shares issued 100,000

Earnings is P400,000

57. What is the average number of shares?

a. 400,000
b. 450,000
c. 500,000
d. 540,000
58. Earnings per share is
a. 0.88
b. 0.89
c. 0.80
d. 0.74

For items 59 & 60

Culture company provided the following on Dec. 31, 2013:

Ordinary share capital, P20 par value, 200,000 shares 4,000,000

Preference share capital,6% P100 par value,cumulative
And fully participating, 10,000 shares 1,000,000

Preference dividends have been in arrears for 2011 and 2012. On December 31, 2013, a cash
dividend of P900,000 was declared.

59. What is the dividend payable on the preference shares?

a. 180,000
b. 324,000
c. 276,000
d. 220,000
60. What is the dividend payable on the ordinary shares?
a. 576,000
b. 672,000
c. 720,000
d. 624,000